U.S. Probes Credit Suisse Over Possible Client Tax Evasion at Israel Unit
June 22 2016 - 2:30PM
Dow Jones News
ZURICH—U.S. authorities are investigating Credit Suisse Group
AG's operations in Israel, people familiar with the matter said,
once again placing the Swiss bank under Justice Department scrutiny
related to its handling of American clients.
The Justice Department recently notified Zurich-based Credit
Suisse of the investigation, which is focused on determining
whether employees in Israel helped dual Israeli and U.S. citizens
conceal their U.S. status to evade American taxes, the people
said.
Information about foreign banks' clients who are identified as
American must now be automatically transmitted to U.S. tax
authorities, under the recently-implemented U.S. Foreign Account
Tax Compliance Act.
Banks including Credit Suisse have sought to bulk up on related
compliance efforts, to ensure clients with U.S. ties—even those
with citizenship in additional countries—are flagged.
The new probe comes roughly two years after Credit Suisse
pleaded guilty in the U.S. to conspiring to help American clients
evade taxes. Credit Suisse agreed to pay $2.6 billion to various
regulators as part of its settlement and entered into a plea
agreement stipulating it would close accounts of U.S. clients who
fail to report their assets for tax purposes.
Credit Suisse also agreed to supervision by a monitor, selected
by the New York Department of Financial Services, who is tasked
with investigating the bank's dealings with U.S. customers. The
monitor, who is still scrutinizing Credit Suisse, has been made
aware of the new investigation, a person familiar with the matter
said.
The investigation is another potential headache for Credit
Suisse as it struggles to revamp under Chief Executive Tidjane
Thiam, who took over roughly a year ago. Mr. Thiam has sought to
curb riskier, more-costly investment banking businesses and to
bolster wealth-management operations with a sharper focus on
compliance.
"We aim to operate going forward at the highest levels of
compliance," Mr. Thiam said at a recent news conference. "From the
past you can find all kinds of legacy issues."
After Credit Suisse was notified of the Justice Department's new
probe focused on the Israel office, the bank began its own internal
investigation, people familiar with the matter said.
Without mentioning Israel, a Credit Suisse spokeswoman said the
bank is conducting an internal employee-conduct investigation
"related to tax matters," and that five employees have been placed
on leave. She declined further comment.
Credit Suisse had earlier confirmed its internal probe to Swiss
newspaper Schweiz am Sonntag.
A Justice Department spokeswoman declined to comment.
The Justice Department's examination is focused on the period
leading up to Credit Suisse's 2014 guilty plea and the period
following it, a person familiar with the matter said. The May, 2014
plea brought to a close a Justice Department investigation that had
lasted several years.
The U.S.-based monitor probing Credit Suisse on behalf of the
New York Department of Financial Services, Neil Barofsky, started
his oversight of the bank in October, 2014, and was meant to remain
in place—at the bank's expense—for no more than two years. However,
the bank's struggles in providing Mr. Barofsky with all of the
information he has required about its business with U.S. clients
may extend his tenure.
Costs stemming from the bank's tax-related U.S. settlements,
including those resulting from the monitor, have totaled 285
million Swiss francs ($297 million) since the second quarter of
last year, according to public filings.
The U.S. has been cracking down on Swiss banks for harboring
untaxed American assets for several years. The Justice Department
recently completed a self-reporting program for dozens of Swiss
banks that disclosed undeclared U.S. money on their books and paid
related fines in exchange for agreements that the banks wouldn't be
criminally prosecuted.
Other Swiss banks that, like Credit Suisse, came under Justice
Department investigation for aiding U.S. tax evasion, were unable
to join the program because they were already under criminal
probes. A handful of Swiss banks remains under investigation.
Laura Saunders contributed to this article.
Write to John Letzing at john.letzing@wsj.com
(END) Dow Jones Newswires
June 22, 2016 14:15 ET (18:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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